Ferrochrome sector must consolidate: ENRC

NEW YORK  The ferrochrome sector needs global supply to consolidate for prices to improve, according to Eurasian Natural Resources Corp. Plc (ENRC).

Consolidation is probable, most likely in China and South Africa, with many ferrochrome companies producing at a loss in the current pricing environment, London-based ENRCs head of strategy, Mark Midgley, said at AMMs 27th Annual Stainless and its Alloys Conference in Chicago.

"We believe in due course there will have to be some casualties at the top of the cost curve. I think there will eventually be some cuts in China, though that tends to be a very slow process," Midgley said. "I think we could eventually see some cutbacks in South Africa. We could see more companies moving away into other forms of production, or closing."

He said that currency depreciation in countries such as South Africa, Turkey and India has been the only reason many ferrochrome producers have kept their heads above water. "Without these dramatic currency devaluationswhich have risen to as high as 35 percenta lot of the production would be sunk," he said. "Its good that the industry is maintaining its supply base, but thats why prices are going nowhere at the moment."

Midgley said that while 3.5-percent annual growth in the global stainless steel industry should support the ferrochrome industry, more growth is needed outside of China, which sources most of the ferrochrome it needs domestically.